Indian IT services market on pace to reach $9.5 billion in 2011: Gartner

BANGALORE: The India IT services market will grow 18% in revenue terms to reach $9.5 billion in 2011. India's domestic IT services market ranks third in Asia/Pacific and is forecast to grow to $15 billion by the end of 2014, research firm Gartner said in a report.

India's IT services market is still small when compared to large markets such as the US or the UK, but it offers a growth opportunity to the service providers because of the buoyant market conditions. Gartner analysts said the market had a critical mass that is worth tapping and has the potential to expand further with "as a service"-type service offerings.

"Coupled with other factors such as openness to adopt technology, and a maturing sourcing approach, India represents an attractive target potential for providers of all sizes. The top 10 providers have a cumulative market share of just 42 percent, indicating a highly fragmented market served by many small players with no large, dominant, well-entrenched player. However, this scenario varies widely by submarket such as by industry vertical," Arup Roy, principal research analyst at Gartner said.

India's growth fundamentals are on relatively solid footing and can support sustainable growth and development in the near future. High GDP growth rate leading to growth across industries is the key to sustained IT services growth potential. Gartner sees government infrastructure projects strongly driving IT, in conjunction with the expansion of the financial services and manufacturing subsectors.

At present only four industry verticals make up the bulk of the market (85 percent of all IT services spending) namely banking, financial services and insurance; telecommunications; manufacturing; and government, the report said. This means that other industry verticals offer a good opportunity of growth as they start opening up and start engaging with external service providers (ESPs).

The share of local providers and multinational corporation (MNC) providers in India is almost the same — approximately 20 percent. Six of the top 10 providers are Indian (22.3 percent market share) and four are MNC providers (19.7 percent market share). So these two groups of vendors are about equally placed.